Thailand hits recession but the worst could be over
Updated
Authorities in Thailand have confirmed the country is in recession. The economy shrank a stunning seven per cent in the first quarter, far worse than expectations. Manufacturing and business investment have been hard hit by the combination of the global slowdown and Thailand's domestic political problems. But some say the worst might be over.
Presenter: Karon Snowdon, finance correspondent
Speaker: Rajeev Malik, director, India and ASEAN economics, Macquarie Securities; John Koldowski, managing director, Pacific Asia Travel Association
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SNOWDON: A seven per cent contraction for the first quarter shocked economist Rajeev Malik, enough for him to lower his full year GDP growth forecast.
MALIK: We were before these numbers looking at a contraction of two per cent following this worse than expected first quarter number we will fine-tune our numbers to expecting a decline of negative two-and-a-half per cent. It's still better than what I think the consensus expectations.
SNOWDON: Rajeev Malik is the head of India and ASEAN Economics at Macquarie Securities, whose growth forecast for the full year is more optimistic than the governments of minus 3.5 per cent growth. He says the electronics industry in Thailand as elsewhere is showing some sign of improving, although up until March total manufacturing was the main casualty of the global slowdown.
In Thailand as a sector it fell by 15 per cent, possibly with permanent job losses.
MALIK: I think part of that would be there but don't forget the hit to Thailand over the last six to eight months was a combination of two things. One, one somewhat temporarily was the airport closure in December of last year, and obviously the ongoing political dynamics have also had a bit of a negative impact. Although that's again the current government with fairly able people in place seems to have been sorted out for now. The other issue was really given the export orientation and dependence both on electronics and automotive industries, external slump has hit Thailand hard.
SNOWDON: The Thai government says its second stimulus package announced earlier this month will create two million jobs, but then its forecast was for a first quarter contraction of five per cent; two percentage points better than the actual slump.
The tourism industry is certainly feeling the pinch, says John Koldowski, managing director of the Pacific Asia Travel Association.
KOLDOWSKI: Well it's pretty dramatic, this is perhaps the last thing that Thailand in particular and the region to a lesser degree needed on top of everything else. We are seeing numbers falling, we are seeing yields dropping, we are seeing airlines talking about parking more aircraft, reducing capacity etc., so the immediate, short to medium term doesn't look all that particularly promising.
SNOWDON: John Koldowski can see no light at the end of the tunnel, especially for international travel to Thailand.
KOLDOWSKI: And so we're preparing for a long drawn out siege if you will.
SNOWDON: Rajeev Malik says economic growth should turn positive in the fourth quarter, and believes the worse is over.
MALIK: The worst is definitely over and in fact the data is indicating that on a quarter on quarter sequential basis, fourth quarter of last year posted the most severe contraction, close to around 22 per cent on an annualized basis, and that base of contraction lessened significantly in the first quarter. And we reckon it moves into positive territory in the second quarter.
